The Supreme Court of the Czech Republic (hereinafter referred to as the "Supreme Court") on 12 May 5 in the proceedings under no. no. NS 2021 Cdo 27/3549 decided to reject the appeal of the appellant, who sought an assessment of whether the "proposal for registration of the subject of business "real estate brokerage" in the commercial register must be - under the legal regime effective from 2020/3/3 - documented (outside other) by the decision of the general meeting to change the articles of association in a situation where "Production, trade and services not listed in Appendices 2020 to 1 of the Trade Act" was designated as the subject of the company's business in the articles of association of this trading company and entered in the commercial register.
The Supreme Court assessed that the definition of free trade in the articles of association is not sufficiently certain for the registry court to enter the required "real estate mediation" in the subject of business.
On this specific question regarding the relatively newly changed business conditions in the field of real estate brokerage, the Supreme Court expressed itself quite extensively and immediately got bogged down in the question of the definition of the subject of business in the articles of association of the company and its entry in the commercial register. In points [28] to [31], the Supreme Court stated the definition of the subject of business as "production, trade and services not listed in Appendices 1 to 3 of the Trade Act" as follows: not listed in Appendices 1 to 3 of the Trade Act does not meet the requirement of certainty, as it is not clear from it what the subject of the company's business is, and the corresponding result cannot be obtained even by interpretation... The Supreme Court therefore concludes that even by interpreting the provisions of the statutes, according to which the subject of business is joint-stock companies manufacturing, trade and services not listed in Appendices 1 to 3 of the Trade Act, it is not possible to find out what the company's business is (determine its specific content). Such an arrangement is therefore, due to the uncertainty of its content, apparent (§ 553 oz) and is disregarded (§ 554 oz)". The Supreme Court also commented on the very entry of this business in the commercial register, when it said: "From the above it also follows that the commercial register, according to § 25 paragraph 1 letter b) zvr records the business or activity of the business corporation, not the designation of the trade. Thus, in relation to the list of fields of activity in Annex No. 4 of the Trade Act, partners or members of a business corporation usually specify (and the articles of association or articles of association contain) some of the calculated fields of activity. These will be entered in the commercial register as a subject of business or activity of the corporation. If production, trade and services not listed in Appendices 1 to 3 of the Trade Act are listed in the articles of association (articles of association) and, where appropriate, entered in the commercial register as the subject of business, this entry contradicts § 25 paragraph 1 letter b) svr and it is necessary to request a remedy in accordance with the procedure according to § 9, paragraph 1 of the svr".
According to the above, in the event that a commercial company had only the formula "production, trade and services not listed in Appendices 1 to 3 of the Trade Act" listed in the Commercial Register in the "Purpose of Business" section, it would not meet the conditions of Act No. 304/2013 Coll., on public registers (hereinafter referred to as the "Act on Public Registers"), which in the worst case could mean the dissolution of the company with liquidation. Although the decision in question looks quite fatal for many companies at first glance, according to the authors of this article, there is no reason to panic yet.
Nullity of registration
We see the view of the Supreme Court on the nullity of the agreement on the subject of the company as problematic. According to the Supreme Court, from the subject of business "manufacturing, trade and services not listed in Annexes 1 to 3 of the Trade Act" the specific activity of the company's business cannot be read, which causes the appearance of actions pursuant to § 553 of Act No. 89/2012 Coll., Civil Code (hereinafter referred to as " civil code" or "OZ"), to which the law is not taken into account.
Uncertainty of legal action occurs when the expression of will, which was aimed at legal action, is not sufficiently specific and clear, so that it is not possible to determine what legal consequences the expressed will is intended to produce. It applies that the content of a legal transaction is sufficiently defined if it is possible to determine what rights and obligations the parties should have from the legal transaction. The same applies to the subject of legal action, which is defined sufficiently if it is specified in such a way that it can be identified and distinguished from the subjects of others.[1] Incomprehensibility or indeterminacy can, however, be overcome by interpreting the legal act. The Supreme Court in the judgment of 31.10.2017 in proceedings under no. stamp 29 Cdo 61/2017 stated that "For the interpretation of a legal act, the real will (intention) of the actor (which was or must have been known to the addressee) is decisive, which must be prioritized over its external manifestation (e.g. the objective meaning of the words used). "[2] According to the authors of this article, there is no doubt about the intention of the statutory body of the company to register the subject of business as a free trade. The question arises here, from what the Supreme Court assesses the indeterminacy of the registered subject of business "production, trade and services not listed in appendices 1 to 3 of the Trade Act". Free trade is the only one in the Czech legal system and it provides sufficient differentiation from craft, bound and licensed trades. If the Supreme Court required the listing of all registered fields of activity, the commercial register would replace the function of the trade register, which is undoubtedly not its purpose.
In addition, it can be noted that entries in the commercial register are a unilateral, declaratory act, where the principle of dispositiveness is fully applied, and it is only a matter of the specific company which fact it wants to have entered in the commercial register (taking into account that this fact must not be in any way lying or otherwise violating legal principles). If the company determines that it will have a somewhat more general formula stated in the commercial register, it is not within the competence of the court to force the company to specify this entry.
Practice of registry courts
According to the provisions of § 25 paragraph 1 letter b) the subject of activity or business is entered in the public register, however, it does not discuss the form of the provision in question. Even if we accept the Supreme Court's thesis about the vagueness of the registration, we consider it unethical to punish business companies because of this. After the amendment to the Trades Act in 2008, it was precisely the registry courts that introduced the practice of registering, on their own initiative and without a proposal from the companies concerned, a change in the subject of business of legal entities to the formula "Production, trade and services not listed in Annexes 1 to 3 of the Trades Act". Moreover, this practice has existed here for many years, and apart from a few academic opinions and lower court decisions, there has never been an initiative to change it.
After all, the High Court in Prague also took the same position on this topic, namely in the decision of 25.7.2018 with file no. No. 14 Cmo 465/2017, when he stated that it cannot be ruled out that specific fields of activity are also registered as part of the subject of business, however, it is clear from the current practice of the register courts that the subject of business of free trades is entered in the commercial register without further specification consisting in listing the fields of activity that the entrepreneur has registered in the trade register.[3]
At the same time, we consider it appropriate to mention that the registry courts probably do not have the capacity to intervene in any way against commercial companies with the relevant registration of the subject of activity. Even if the situation eventually changes and the registry courts find enough space to force commercial companies into these changes, it would be necessary to simultaneously dwell on the relevance of this problem, when in our opinion, the registry courts have more important goals that they must pursue as part of their activities.
záver
In conclusion, we must point out that although the decision in question caused a lot of panic in the legal space related to surrender, we do not see the decision in question of the Supreme Court as catastrophic as others. As we stated in the previous paragraphs, in our opinion, we cannot fully identify with the argument of the Supreme Court at the moment. It can also be mentioned that a number of companies that have the subject of activity listed in the commercial register as "production, trade and services not listed in Appendices 1 to 3 of the Trade Act" have specific types of activity listed in their articles of association, in which case the companies only need to make a change in the commercial register. At the same time, we see the busyness of the courts as another obstacle to the implementation of this change, when, in our opinion, the registry courts do not have the capacity to call for correction or subsequently sanction the companies affected by the decision.
Although we do not find this problem to be insurmountable, we would appreciate it if the Supreme Court came up with a unifying position on this topic, where the final position on this matter would be finally taken and the related questions would be answered at the same time. In this form, the decision acts only as an obiter dictum, and its binding nature can be disputed. Only the nearest future will show how the decision in question will be reflected in the life of commercial companies not only within the commercial register.
Source: epravo.cz
The team of the Vych & Partners law office, p.r.or.
[1] HANDLAR, Jiří. § 553 [Uncertainty and unintelligibility]. In: LAVICKÝ, Petr et al. Civil Code I. General part (§ 1−654). 1st edition. Prague: CH Beck, 2014, p. 1977.
[2] Judgment of the Supreme Court of the Czech Republic dated 31 October 10 under file no. 2017 Cdo 29/61, available for example here: http://kraken.slv.cz/2017Cdo29/61
[3] Resolution of the Supreme Court in Prague of 25/7/2018, 14 Cmo 465/2017, 25/7/2018
